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Fighting Fraud 101Smart Tips for Investors
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Even if you have never been subjected
to an investment fraudsters salespitch, you probably know someone
who has. Following the legendary
Willie Sutton principle, fraudsters tend
to go where the money isand thatmeans targeting older Americans who
are nearing or already in retirement.
Fraudsters also have in their sights the
millions of Baby Boomers who havebeen accumulating sizeable retirement
nest eggs through company 401(k)
plans and personal accounts.
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The Face ofInvestment FraudRecent research has shattered the stereotype ofinvestment fraud victims as isolated, frail and
gullible. Do you know anyone who meets thefollowing description?
Self-reliant when it comes tomaking decisions
Optimistic
Above-average financial knowledge
Above-average income
College-educated
Experienced a recent healthor financial setback
Open to listening to new ideasor sales pitches
If so, you know someone who fits the profile ofan investment fraudsters prime target.
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The Psychologyof a ScamWeve all heard the timeless admonition, If itsounds too good to be true, it probably is
great advice, but the trick is figuring out whengood becomes too good. Theres no brightline. Investment fraudsters make their living bymaking sure the deals they tout appear bothgood and true.
Theyre masters of persuasion, tailoring their
pitches to match the psychological profiles oftheir targets. They look for your Achilles heelby asking seemingly benign questionsabout
your health, family, political views, hobbies orprior employers. Once they know which buttons
to push, theyll bombard you with a flurry ofinfluence tactics, which can leave even thesavviest person in a haze.
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The truth is, were all at risk. Anyone
with any money is bound to hear from
a fraudster at some point. But you canhelp protect your family and friends by
recognizing how investment fraudsters
operate and by reporting suspicious
sales pitches and actual scams.
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Commontacticsinclude:
ThePhantomRichesTacticdangling theprospect of wealth, enticing you with something
you want but cant have. These gas wellsare guaranteed to produce $6,800 month inincome.
TheSourceCredibilityTactictryingto build credibility by claiming to be with areputable firm, or to have a special credentialor experience. Believe me, as a senior vice
president of XYZ Firm, I would never sell aninvestment that doesnt produce.
TheSocialConsensusTacticleadingyou to believe that other savvy investors havealready invested. This is how ___ got his start.
I know its a lot of money, but Im inand so ismy mom and half of her churchand its worthevery dime.
TheReciprocityTacticoffering to do asmall favor for you in return for a big favor.Ill give you a break on my commission if youbuy nowhalf off.
TheScarcityTacticcreating a false senseof urgency by claiming limited supply. There are
only two units left, so Id sign today if I were you.
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Investment FraudProtect YourselfIf these tactics look familiar, its becauselegitimate marketers use them, too. But one keydifference is that real deals will still be theretomorrow. So always take the time to stop andthink before making a decision.
Here are three key strategies youor anyoneyou know who fits the profile of a potential fraud
targetcan use to help distinguish good offersfrom bad ones:
End the conversationPractice saying No. Simply tell the person,
I am sorry, I am not interested. Thank you.Or tell anyone who pressures you, I nevermake investing decisions without firstconsulting my ____. I will contact you ifI am still interested. Fill in the blank withwhomever you chooseyour spouse,child, investment professional, attorneyor accountant. Knowing your exit strategyin advance makes it easier to leave theconversation, even if the pressure starts rising.
Turn the tables and ask questionsA legitimate investment professional mustbe properly licensed, and his or her firmmust be registered with the Financial IndustryRegulatory Authority (FINRA), the Securities
and Exchange Commission (SEC) or a statesecurities regulatordepending on the typeof business the firm conducts.
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In addition, with very few exceptions, companies
must register their securities with the SEC beforethey can sell shares to the public. So, before yougive out information about yourself:
Ask:
Are you and your firm registeredwith FINRA? Are you registered with the SEC? Are you registered with a state securities
regulator? Which one(s)?
Is this investment registered with theSEC or my state securities regulator?
Check:
Verify the answers by checking the sellers
background. Visit SaveAndInvest.org or call(888) 295-7422.
Or use these other helpful resources for moreinformation about:
Abrokerorfirm: FINRABrokerCheck www.finra.org/brokercheck
(800) 289-9999
Aninvestmentadviser:
SECInvestmentAdviser PublicDisclosureDatabase www.adviserinfo.sec.gov
Anyinvestmentseller: NorthAmericanSecurities
AdministratorsAssociation www.nasaa.org
Aninsuranceagent: StateInsuranceCommission
National Association of
Insurance Commissioners www.naic.org
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Check:(continued)
Check out the investment and confirm whatthe salesperson tells you using the SECs EDGARdatabase of company filings:
Forinvestments:
SECsEDGARDatabasewww.sec.gov/edgar.shtml
Also, call your state securities regulator to findout what they know about the company.
See the tear-off Resources panel for moreinformation.
Talk to someone firstBe extremely skeptical if the person
promoting the deal says, Dont tell anyoneelse about this special deal! A legitimateinvestment professional wont ask you tokeep secrets.
Even if the seller and the investment are
registered, its always a good idea to discussthese sorts of decisions with family or atrusted financial professional.
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Take Your Name OffSolicitation ListsOne easy step you can take to reduce thenumber of sales pitches you receive is to take
your name off of telemarketing and junk mail
lists. Businesses that advertise or market theirproducts and services directly to consumerstypically purchase or compile their own lists ofpotential customers.
The answer to how did they get my name?
is fairly simple: local phone listings, public realestate records, tax assessments on personalproperty, donations to political or charitableorganizations, club rosters, alumni listingsand a host of other sources. Online advertisers
use cookies, which are small data files thattrack information about you, such as your Webbrowsing patterns and items youve put intoonline shopping carts.
Heres how to cut the clutter:
TelemarketingCalls
www.donotcall.gov
or call toll-free (888) 382-1222
DirectMailandEmailOffers
www.dmachoice.org CreditCardOffers
www.optoutprescreen.com
or call toll-free (888) 567-8688
OnlineCookieCollecting
www.networkadvertising.org
Most legitimate businessesincluding securitiesfirmswill honor your request. So, if you receivea solicitation after taking the steps above, you
should be all the more skeptical of the offer.
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Who We Are
FINRA, the FinancialIndustryRegulatory
Authority, is an independent regulatoryorganization empowered by the federalgovernment to ensure that Americas 90million investors are protected. The missionof the FINRAInvestorEducationFoundation
is to provide underserved Americans withthe knowledge, skills and tools necessary forfinancial success throughout life. FINRA andthe FINRA Investor Education Foundation donot sell investment products, promote products
or firms or offer specific investment advice.The FINRA Foundations Investor ProtectionCampaign, SaveAndInvest.org, is a targetedeffort to reduce the incidence of investmentfraud among investors by teaching the tactics
most commonly used by fraudsters and thesimple steps every investor can take to reducetheir risk. Become a Fraud FightervisitSaveAndInvest.org.
The U.S. Securities and Exchange Commissions Office
of Investor Education and Advocacy has reviewed this
publication. The SEC does not endorse any particular
investment product, service, profession, professional or
brokerage firm.
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If a Problem OccursIf you believe you have been defrauded or treatedunfairlyor if you suspect that someone youknow has been taken in by a scambe sure tosend a written complaint to a securities regulator.
Heres where you can turn for help:
FINRAComplaintsandTips9509 Key West AvenueRockville, MD 20850
Fax: (866) 397-3290www.finra.org/complaintwww.finra.org/fileatip
SECOfficeofInvestorEducationandAdvocacy100 F Street, NE
Washington, DC 20549-0213Phone: (800) SEC-0330Fax: (202) 772-9295www.sec.gov/complaint.shtml
StateSecuritiesRegulator
North American SecuritiesAdministrators AssociationPhone: (202) 737-0900www.nasaa.org
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ResourcesBefore you invest, ask and check. Visit or call:SaveAndInvest.org
(888) 295-7422
Or use these other helpful resources for moreinformation about:
ABrokerorFirm:FINRABrokerCheckwww.finra.org/brokercheck
(800) 289-9999AnInvestmentAdviser:SECInvestmentAdviserPublic Disclosure Databasewww.adviserinfo.sec.gov
ABroker-Dealer,InvestmentAdviserorInvestment:NorthAmericanSecuritiesAdministratorsAssociationwww.nasaa.org
(202) 737-0900
AnInsuranceAgent:NationalAssociationofInsuranceCommissionerswww.naic.orgPhone: (866) 470-6242
AnInvestment:SECsEDGARDatabasewww.sec.gov/edgar.shtml
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Keepth
iscardsomewhereh
andy!
Protect Yourself fromInvestment FraudAlways take the time to stop and think beforemaking an investment decision. Here are three
key strategies you can use to help distinguishgood investment offers from bad ones:
Endtheconversation:Simply tell theperson, I am sorry, I am not interested.Or tell anyone who pressures you, I nevermake investment decisions without firstconsulting my ___. Fill in the blank withwhomever you choose. And dont worryabout missing outreal deals will still bethere tomorrow.
Turnthetablesandaskquestions:Beforeyou give out information about yourself,or sign on the dotted line, ask, Are youa licensed broker? Is that investmentregistered? Then check out the sellerand the investment using the resourceson the back of this card.
Talktosomeonefirst:Even if the sellerand the investment are registered, its
always a good idea to discuss these sortsof decisions with family or a trustedfinancial professional.
LearnmoreatSaveAndInvest.org:
SaveAndInvest.org is a free service from the
financial authorities at the FINRA Investor
Education Foundationhelping protect you from
investment fraud and providing information to
help you confidently handle your finances.
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SaveAndInvest.org1735 K Street, NWWashington, DC 20006-1506www.SaveAndInvest.org(888) 295-7422 11 0011 711/11